Wednesday, February 08, 2006

The Innovation Perspective

I was thinking recently about innovation, and especially the ideas put forth in the book Blue Ocean Strategy. If I understand the premise correctly, the idea put forth in Blue Ocean Strategy is to change the perspective or the way you view the market, and establish or frame new markets where the competition is small or non-existent, rather than chip away at market share in heavily competitive markets. I hope to read the book soon, but hopefully I've captured some of the overall meaning of the book.

If that generalization is true, then it strikes me that this form of innovation is very similar to an old joke that sales people use. Two shoe sales men are assigned a new territory - an island in the Pacific which is long known to be inhabited but never visited by shoe salesmen. The first arrives and recognizes that no one on the island wears shoes. He writes back to headquarters to ask to be brought back. His rationale? No one wears shoes on the island. A second sales person is sent to the island. He writes back to headquarters thanking them for the great opportunity. Turns out, no one on the island wears shoes, and his only competition just left.

The point of the joke is that your perspective matters. The second sales person sees opportunity in the fact that no one wears shoes, and sees big sales for himself, while the first salesperson was discouraged by this fact. One sees potential customers, the other sees no customers at all.

A good example that is often used, and I think used in Blue Ocean, is Southwest Airlines. Now, I have a bit of an inside view of Southwest as my lovely spouse worked there once. I think Southwest was started by people who simply wanted to improve the ability to get around in Texas - really not much more than that. If you have ever been in Texas you'll know there are three major cities (Dallas, Houston and San Antonio) and it is very time consuming to move between them. Texas is after all a large state. There were no inexpensive means to move between these cities, and a lot of business is conducted between these cities.

Herb Kelleher and others wanted to break the monopoly and poor schedules of the existing airlines, so they built their own. I don't think the original intent was to provide basic, low cost airfare for the common man, but to make business travel cheaper and easier within Texas.

What happened over time, though, is that Southwest recognized a huge opportunity to shift the frame of "air travel". For a long time, air travel was expensive and considered to be a luxury. Well, in the Southwest, where you can drive 10 hours and still be in the same state (believe me I've done it), long distance travel isn't a luxury but a necessity. Southwest eventually identified a core group of prospective customers who would normally drive or take the bus, and decided to bring those people to air flight. These were underserved customers that the major airlines did not think were potential customers. Eventually, Southwest became for all intents a bus that flies, offering good schedules, short hops, low fares and pleasant but minimal service. I'm not sure that was the intent from the start, but Southwest eventually created its own "Blue Ocean".

Now, this is all a matter of perspective. Southwest did not fundamentally change air travel. Pilots still sit in the planes, and baggage handlers still load and unload planes. Southwest's planes still fly between cities. What they did change was the fare structure, to make it more affordable to fly in a region where long distance travel was just accepted as a fact of life. Southwest never could have been formed in the Northeast of the United States, since you can drive or in some cases take a convenient train between most major cities.

In this instance, and in many others, innovation is a matter of perspective. What customers aren't served, and how can we serve them? What markets aren't open and how can we open them? Who needs to travel long distances and how can we change their travel paradigm?

Innovation does not have to be about new products and services. Southwest is doing what Braniff and Continental and American and TWA and so on have done for years. They simply defined a market and built a company to serve that market.

46 Comments:

Jeffrey, enjoyed your essay. Makes me want to read the book now, too. Southwest has always been a fascinating company to watch. They make it look easy don't they? But we know that simple doesn't mean easy. Thanks. Posted a link at http://ContraryValley.typepad.com.

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